Currently the Russian Mass Media Law (Law No. 2124-1 “On Mass Media” dated 27 December 1991) prohibits foreign investors – including Russian companies with at least 50% foreign participation and Russian citizens with dual citizenship – from establishing or acquiring an interest in TV and radio or video channels in Russia, as well as in broadcasting companies which cover more than half of the territory of Russia.
Substantial amendments to the Mass Media Law (the “Amendments”) were signed into law by the Russian President on 14 October 2014.
In essence, these Amendments lower the foreign ownership threshold to 20% and extend this restriction to all mass media (including print and web media) and broadcasters regardless of the type of media and the broadcast coverage.
Scope of the Amendments
The Amendments apply to shareholdings in Russian companies that (i) hold the respective mass media registration certificate or are a mass media editorial office, or (ii) hold the respective broadcasting licences (“Russian Media Companies”).
Under the Amendments:
- foreign investors (meaning foreign states, international organisations, foreign companies and foreign citizens, as well as Russian citizens with dual citizenship) cannot directly hold any shares or participatory interests in Russian Media Companies;
- indirect participation as well as any other form of control by foreign investors over Russian Media Companies (including, for instance, under shareholders agreements) are subject to a 20% maximum threshold.
Timing and reporting requirement
The Amendments enter into force on 1 January 2016.
The shareholding structures of Russian Media Companies must be brought in line with the Amendments by 1 February 2016. The respective report confirming compliance with the new requirements must be submitted to the Federal Service For Supervision of Communications, Information Technology and Mass Media ( “Roskomnadzor”) before 15 February 2016. As the wording of the Amendments is unclear, it cannot be excluded that this reporting requirement may apply to all companies regulated under the Mass Media Law (rather than just to those that will have taken steps to become compliant).
A longer transition period is being introduced for foreign-owned Russian Media Companies, which are nevertheless at least 80% controlled by ultimate Russian beneficiaries. In this case, the shareholding structure of these companies will have to be brought in line with the Amendments by 1 February 2017, while the respective report will have to be filed with Roskomnadzor by 15 February 2017 at the latest.
Failure to comply with the new requirements (including failure to submit the compliance report to Roskomnadzor within the established deadlines) may lead to:
- a court-ordered suspension of activities of the mass media concerned further to an application by Roskomnadzor;
- foreign investors or their subsidiaries not being able to exercise their rights as company shareholders (including voting rights); and/or
- any transactions concluded in breach of the new requirements being null and void.
As direct foreign ownership is prohibited in, and the new 20% threshold covers, all mass media and broadcasting companies regardless of the type of media and the broadcast coverage (including print and web media), it is recommended to:
- proceed with an analysis of the ownership structure of, and shareholding arrangements in relation to, Russian Media Companies, and take steps to restructure them if necessary (including by way of sale of a part of shares to Russian partners) in order to comply with the new requirements; and
- ensure that the compliance report is submitted to Roskomnadzor within the established deadlines (i.e. under the general rule before 15 February 2016).